In 2017, businesses paid over $200 billion in commercial insurance premiums. Sounds like a lot?
Well, it is. But if disaster strikes then business insurance could be your best friend. And if you don’t have it, you might want to consider investing in it as soon as possible.
So what is business insurance?
To figure out why you need business insurance, we’ve put together this handy guide. Read on to find out all about the benefits of insurance for business.
What Is Business Insurance?
You’re probably already familiar with the concept of insurance. In fact, most of you will probably already have some kind of insurance in place.
Insurance is a great way to protect the things you value. This includes your home, your health, and your valuable possessions. Losing any of these things could come with a huge financial cost.
And the same is true for your business. There are loads of reasons that businesses lose money. In many cases, this loss of capital puts the whole business in jeopardy and can lead to it failing.
Investing in business insurance can protect you against some of the things that might lose you money. In these cases, business insurance can protect you by covering the costs.
What Does Business Insurance Cover?
So what does business insurance cover? Well, the short answer is anything you want it to.
Most types of business insurance will protect you from financial claims against your business. This might be in the form of covering legal fees. Or it might even cover compensation payout.
There are several different types of business insurance to choose from. And the best type of insurance for you depends on your area of business.
Liability insurance deals focus on protecting you from lawsuits.
Professional liability insurance protects you as a business owner against claims of negligence. This means it protects you against errors in performance within your business that result in a claim against you. Negligence claims can cost a company thousands of dollars.
Public liability insurance focuses on the everyday running of your business. It covers you for any accidents that might occur on or around your premises. This means you don’t personally have to pay out huge amounts if someone makes an accident claim against you.
In contrast, property liability insurance focuses on businesses that manufacture products. This covers you for any claims made as a result of damages that your products cause. If you’re putting anything out into the world you should invest in this.
Some types of business insurance focus more on the physical side of your assets. Property insurance and vehicle insurance ensure you don’t lose out if these are damaged.
And business interruption insurance covers you if anything disrupts your ability to run the business as usual. This can cover a huge variety of events.
If you work from home, rather in an office, you might also want to look into home-based business insurance. Whatever your needs, there’s a deal out there for you.
How Does It Work?
You get your insurance from a broker, such as Morison Insurance Brokers Inc.
Like with most insurance deals you pay regular premiums on your package. This means further down the line you can make a claim, should you need to.
The price of your premium payments will depend on a lot of different things. These include:
How much you want to cover your business for
Any emergency fund requirements
Value of your business
Length of contract
Frequency of payments
Range of cover
To get the best deal, shop around. And as every business is different, you can discuss personalizing your plan with your broker.
It might be tempting to forego this financial outgoing. But you should view it as an investment in your business’ future.
There are loads of benefits to having business insurance. So let’s take a look at them.
It’s a Legal Requirement
This isn’t necessarily a perk. It’s more of a reason to get business insurance.
A lot of states require you by law to have liability insurance. According to the US Small Business Administration, any employer must provide worker’s compensation. This is something that employer’s insurance or liability insurance can cover.
This means that as an employer you are able to look after your employees. So you can maintain your contractual obligations to them even if the business is in trouble.
It Could Keep You in Business
Business insurance covers you for anything that impacts your ability to run your business.
Physical damage to your property can impact your work. Insurance can cover the cost of repairs to this. But they’ll also cover a contingency plan so you don’t have to stop working while this happens.
Or, if you do stop working, they’ll provide you with compensation to cover your losses.
Some plans will even cover you to pay your employees while the business isn’t running. These schemes can allow you to pay employees for up to 12 months at a time. Without this, you could be looking at losing thousands of dollars due to contractual obligations.
A huge variety of things could infringe on your ability to work. When natural disasters, like earthquakes or floods, occur you might find it difficult to get your business back on its feet.
These aren’t your fault. But without business insurance, you’ll be the one who pays the price for them.
To protect yourself from these kinds of natural disasters, make sure your policy covers ‘Acts of God’. These are events that are out of human control (such as natural disasters.) Not all policies cover them, as they are often lead to big payouts when they occur.
Property and casualty insurance will both protect you against ‘Acts of God’. The two types to look for at all-risk or peril-specific cover.
It Might Help You Secure Contracts
The way you run your business can have a huge impact on which clients want to work with you.
Having business insurance demonstrates that you’re thinking ahead. It shows that you have thought about all possible outcomes and are ready for them.
And this encourages trust from potential clients. They’d much rather work with someone reliable than with someone who’s flying by the seat of their pants.
Business insurance minimizes your level of risk while running your business. So it also minimizes their risk in using your services. So it’s a win-win for everyone.
While trying to secure clients or contracts, it means you can promise to deliver the goods come what may. And who doesn’t want to hear that in a meeting room?
In some cases having business, insurance might also make or break a deal. Some contracts will actually stipulate that you need business insurance. This is because it covers the client’s back throughout your deal.
It Can Protect You From Lawsuits
Still wondering “do I need business insurance”?
Every year there are an estimated 40 million lawsuits filed across America. Not all of these target businesses. But accidents at work, broken contracts or office conduct disputes can all lead to a lawsuit.
These can come from employees or from clients. In fact, some clients might not even want to sue you. But to get out of contractual liability it is sometimes the only options.
And being sued can cost thousands of dollars every time. This is true even if you win the case. Because lawsuits come with lawyers fees and these aren’t cheap.
Some lawsuits are ridiculous, some even verge on being hilarious. All the same, you have to respond appropriately to each of them otherwise you remain open to further legal action. So you’ll need a lawyer each time.
This remains the same for any type of lawsuit – whether it’s a claim of negligence. Or an ex-employee seeking compensation for an injury caused at work.
But business insurance can ease the burden here.
Investing in liability insurance covers you for any lawsuits that come your way. It’ll provide financial cover if you have to payout. And it’ll cover the cost of your legal fees during the process.
So it should be a no-brainer for anyone running a business.
It Benefits Your Employee Relations
Employee liability insurance is also a perk for anyone who works for you.
This is because it ensures that any claims they want to make against you will be properly investigated. So they know you have their best interests at heart.
And this creates a relationship of trust with your employees, which is invaluable. After all, they are your most precious asset. And we hope that all employers want to treat their employees with this level of respect and care.
A great employee insurance scheme might also help you snag the best people when you’re recruiting. It demonstrates this care for your employees which is a huge incentive for anyone. You might also want to consider offering disability insurance.
Furthermore, having this insurance can also lower the likelihood of people making claims against you. A lawsuit could also cost them dearly. So maintaining good relations and open communication is a better solution for everyone.
Fewer lawsuits mean you’ll be able to handle disputes more efficiently. This will benefit your whole business.
But with business insurance, you’re ready to face anything thrown at you.
So Do You Need Business Insurance?
The short answer is yes. Now hopefully you know exactly how to answer the question ‘what is business insurance?’
And you’re well aware of how important it is. Not only is it a legal requirement, but there are huge benefits to having it. In fact, one day it could even save your business.
For more amazing tips on how to run a successful business, keep browsing the rest of our blog.